Hey, Samuel Leeds here, and in this video I wanted to give you the pros and the cons
of buying properties from auction. So if you're interested or considering buying properties
from auction, then stay tuned. So overall I would probably not advise buying from auction
specially if you're just starting out. And if you're going to buy from auction, then
definitely watched the whole of this video because I'm going to give you some tips at
the end about how to buy from auction if you do. So the pros, the first pro to buy from
auction is usually if someone's selling their house in an auction they're normally quitting
motivated and we know that the best deals are from motivated sellers. So just put your
house on an auction, you're probably quite motivated, so it is possible to pick a bargain
properties from auctions because you're dealing with motivated sellers.
Second pro is there's no messing around. You're not going to get into a bidding war that drags
on later. You're going to go down to the auction. You're going to put your best offer forward.
If it's not accepted, fine. If it's accepted, then you've got a certain short time period
to complete. You're not going to get gazumped. No messing around straight to the point which
you know is quite an attractive aspect of buying from auction. And then thirdly is it's
quite fun. Going down to an auction, there's a lot of excitement. It's quite satisfying
when you win an auction. They're the three pros. The cons are in auction, it's usually
flooded with properties, not always, but properties that have got something wrong with them. Now
that's okay if you're experienced and you can figure out what's wrong with the property
and you can then add value, but if you're just starting out and you're not that wise
to property, you can get burned by buying a property.
You can't just pull out, you can't go, oh actually the property has got something wrong
with it, so I want to pull out. If you do, you're going to get fined badly. So problem
properties is definitely a con if you don't know what you're doing. Second con is even
if you win at the auction, you're still the loser. In fact, the winner of an auction is
usually the biggest loser of them all because imagine "Who here is the loser, who's prepared
to pay the most money for this pillow?" That could be if there's 200 people in a room and
you're the person who is prepared to pay the most, then you're the loser. So the winners
are the losers, and the losers are the winners in a way from auction. So that's another con.
You're the person who's about to pay the most. So again, unless you're really wise and you
know that you're going to pay that amount because you're going to have to add serious
value. That's another con.
The third con, and possibly the biggest con and the reason why I advise against auctions
the most for people that start now. The whole purpose of an auction and the way it's wired
is it's all about emotions. And what they'll do is they'll tap into emotions. They'll play
you off against other people to try and manipulate you into paying the absolute maximum price
you will for that property. I really believe that when emotions are high and you're excited
and your emotions are high, intelligence is low and that's exactly what they want to happen.
I mean yeah you've probably heard in my videos before, I say buy with formulas, not feelings,
auctions often all about feelings. They trap you because what happens is because on the
day, if you buy it, you've got to go ahead. Then what happens is before you go, you're
going to do your research.
You're going to do a survey on the property. You're going to probably invest time and money
researching the property which means that you're now invested. So when you go to the
auction, you're now invested your energy and your money's invested and you really want
that house. You'll end up paying over the odds for it because you're already emotionally
attached. What happens at auction is a lot of people break the rules of not being emotionally
attached, of using formulas, not feelings. So the key is be very, very careful if you're
buying from auction. Often people think, oh, you know, you buy bargain properties. Do you
buy from auction then? Which is a bit of a myth, a bit of a misconception. I've actually
got friends and what they do is they buy properties that are run down and need a lot of work doing
and they buy them straight from high street agents or from right move.
They do nothing to them at all. They're rundown houses apart from board up the windows and
mud them up a bit and make them even worse. They then put them on an auction and they
sell them for more at an auction that they paid for them from the high street. So getting
bargains from auctions is actually a little bit, can be a little bit of a myth. So I'm
going to give you a few tips if you are buying from auction, on how to do and what to do.
Firstly, the castle that we own, we bought from an auction. But if you're going to go
into an auction, have the maximum price that you're prepared to pay for that property in
mind before you go and do not go a pounds above that price that you've said. Do not
go a pound above it. Decide in the cold light of day, what you're going to pay and then
do not go a pound above it and that way you've got to be super disciplined. That's the first
tip or piece of advice.
Second, which is really important is by pre or post auction, not actually in the room.
And why would you do that? Well if there's a property that's going to auction, workout
what you've prepared to offer it and then just put that forward to the agent. Just say,
"I'm happy to buy this before it goes to auction. This is what I'm prepared to pay for it."
That's a very good way to pick up properties. Post auction is even better because if you
imagine how someone would feel if they put their property on auction and they're just
desperate to just get rid of it in one foul swoop, there was 200 people in the room, let's
say, and it didn't sell. It didn't even hit the reserve price. That seller is going to
have gone from motivated to almost desperate, very, very motivated which is a good time
to then come in. Find properties that are not sold at the auction, then come in post
auction. That's another really good way to buy properties.
And then a final little tip around auctions that I've got is if you're not looking to
buy properties but you're looking to package and sell properties 'cause maybe you've got
no money. A little tip that came from my friend Kenneth Hahn, he said that" If you're looking
for people to sell properties to, the best place to find them is from an auction. Because
if you go to an auction, everyone went to an auction because they've got money, because
they are wanting to invest in or to buy a property." There's only one winner per property
obviously but most people at the end of the auction have not bought anything and they're
probably feeling very disappointed that they didn't buy anything, that they missed out.
So you're in a room filled with people who want to buy property, who are really keen
and have the money. Who are now really disappointed because they weren't able to 'cause they got
gazumped by someone else.
What a perfect opportunity to go up to them and say, "Hey, sorry you missed out. I've
actually got a deal. If you're interested, I can drop you an email if you've got a card."
What an opportunity to find investors to sell them your deal? So there's a little golden
nugget as well for you guys. Anyway, hope that's been helpful. Please do share this
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time.
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